“It’s hard to grow a bank,” says Stuart Cook, Chief Product Officer at Valley Bank in an interview with The Financial Brand. “But in recent years we’ve really started to think about how we can differentiate ourselves from the rest of the pack.”
For a regional bank approaching 100 years old and operating a retail network of about 250 branches, that’s a singular challenge.
Based in Wayne, N.J., with total assets of just over $54 billion, Valley National Bank operates primarily along the eastern seaboard. Valley has experienced substantial growth in recent years through acquisition, organic growth and operating in some interesting niches, including commercial real estate, the cannabis industry, and providing banking services to homeowners associations.
One new area Valley is moving into is working with venture capitalists and banking their portfolio companies. As a side benefit, the bank is exploring technology advances with its own interests in mind.
Valley invested $25 million in The Garage, an Israeli venture capital fund that builds and invests in early-stage startups in fintech, artificial intelligence and cybersecurity. The Garage’s founders and managers are former members of an Israel Defense Forces intelligence and technology unit with years of experience in R&D, technology, and operations.
Entrée to a Fast-Growing Fintech Ecosystem
At first glance, investing in an offshore VC fund may seem like an odd move for a New Jersey-based regional bank. Cook notes Israel has a robust startup economy that produces many fintech “unicorns.” In the first quarter of 2021, Israeli fintech startups raised more than $1.1 billion with 136 new unicorns, a record high achievement and nearly six times the number of new unicorns the year before, according to the Center for Finance, Technology, and Entrepreneurship.
“Israel is a fascinating ecosystem for startups,” says Cook. “You have very smart and talented computer scientists, engineers, and developers that do military service and end up in specialized units.”
Valley Bank got a foot in the door with Israeli fintechs in April 2022 when it acquired Leumi, the U.S. subsidiary of Bank Leumi Le-Israel, for $113 million. Valley acquired the New York City-based bank to supplement its commercial banking experience and “provide new business capabilities in the technology banking and private banking areas,” according to a company statement.
“Through that relationship, we were able to meet the partners of The Garage and talk through the opportunity to provide a channel for these startups in Israel to enter the U.S. market,” observes Cook.
Innovation isn’t just about technology, it’s about culture and ways of working.
Prior to its foray into the world of fintech VC investing, Valley entered the cannabis industry in October 2021 when it announced the creation of a digital payment platform specifically for cannabis-related businesses. Cannabis business owners typically rely on cash transactions as they cannot take credit or debit cards because cannabis remains illegal at the federal level.
Valley’s new digital payment solution, Valley Pay, enables cannabis businesses to migrate cash usage to a secure, compliant mobile wallet payment system similar to Starbucks’ mobile app.
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A Bank-Wide Approach to Innovation
Cannabis payments is only one of several bold moves Valley has taken in recent years. Between Q1 2019 and Q1 2022, the bank’s total assets grew from $32 billion to $54 billion. It is now the 50th largest U.S. bank in the United States by consolidated assets.
Until it recently doubled down on innovation, the Valley operated with the traditional community bank ethos as it has for nearly 100 years. Yet while many banks have explored innovation through the lens of mobile apps and technology platforms, at Valley it’s really about “culture and ways of working,” says Cook.
Creating the right structure for innovation is especially important, considering many banks still operate with legacy technologies siloed in business lines. “It’s not just about spending more money on technology,” Cook observes. “It’s about addressing ways of working, how you think about opportunities, and how you take things to market.”
Why apply digital account opening to just deposit products? The more banks can digitize across all lines of business the better the experience they will provide.
For example, when Valley Bank sought to deliver faster online account opening, it thought about how it could apply that to all the bank’s products. Valley listened to its customers and market demands to reduce friction in many processes. But rather than focus on a single savings account product, the bank aimed to replicate that digitalization across other lines and areas.
“We were very careful as we approached that initiative to think about the capabilities we need in the bank that can help drive that type of innovation not just in siloed product lines, but across the bank,” Cook explains. “How do we do that in a way that is real-time, not dependent on [slow] back-office processes. The most important thing for me was to create this transversal capability.”
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The same capabilities and technology used for Valley Direct are now being used across all the entire organization. Cook says they used that product development as a “wedge” to start thinking about digital-first in everything they do.
To execute its digital vision, Valley has also added new professional roles, such as the head of digital products and director of digital payment, often reaching out to nonbanking professionals.
Cook is an example himself Before coming aboard as Chief Product Officer, he served as the CTO for Buzz Points and Head of Product at Monitise.